A handful of suitors have shown interest in the state’s final commercial casino license, in Southeastern Massachusetts, but the region’s complex development risks may still prove too daunting to potential applicants and leave little or no competition for the license.
State regulators have delayed the application deadlines until 2015, and have taken steps to drum up interest in the region, but they may have to do more to reduce the financial risks if they want to attract strong applicants, specialists say.
At the same time, the regulators face a risk of their own: The project they choose could one day face competition from a tribal casino run by the Mashpee Wampanoag.
“That’s the tricky part about the southeast,” said casino specialist Patrick T. Kelly, chairman of the Department of Accountancy at Providence College School of Business. “Not only could you end up with one casino, you could end up with two.”
The challenging southeast region has returned to the spotlight in recent weeks, after a casino repeal measure failed at the polls and the state gambling commission formally granted licenses to the other two resort casinos.
The southeast is already the least lucrative gambling market in the state. Consultants for the commission estimate that a southeast casino would generate about $369 million in gambling revenue a year. That would be about 81 percent of the projected revenue of a Western Massachusetts casino in Springfield, and just 49 percent of what the Boston-area license is expected to make.
Also, a southeastern casino probably would be the last to open, lagging behind three proposals that won licenses this year: MGM, in Springfield; Wynn Resorts, in Everett; and a Penn National Gaming slot parlor in Plainville.
‘That’s the tricky part about the southeast. Not only could you end up with one casino, you could end up with two.’
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Those businesses could have a headstart of more than a year, during which they can grow customer lists, fine-tune marketing, and build loyalty among patrons.
The Mashpee tribe’s pursuit of a casino is a wild card in the region: It is unknown when or if the tribe will overcome legal hurdles and open a casino in Taunton. Federal law permits recognized tribes to host gambling under certain circumstances, without need for a state casino license.
Given the smaller, riskier southeast market, casino developers have raised concerns about the state’s minimum investment requirements. By law, developers of a resort casino in Massachusetts must invest at least $500 million in the facility.
Some costs do not count toward the minimum, such as land and the $85 million state licensing fee. All told, the total investment to build in the southeast may be too high for the market, an affiliate of Rush Street Gaming wrote last spring, in an appeal to state regulators to bring down the out-of-pocket costs of the project.
“To require applicants to spend more than what [the southeast] can support in light of the region’s unique risks and competitive dynamics creates a hardship,” the company wrote.
To stir up more interest in the southeast, the gambling commission has expanded the types of nonconstruction costs that count toward the $500 million investment, adding infrastructure improvements outside the project’s boundaries and some financing costs.
Regulators may need to do more to generate a healthy number of bids, said casino specialist Clyde Barrow, chairman of the political science department at the University of Texas-Rio Grande Valley, and formerly of the University of Massachusetts system.
“There is some wiggle room in how that $500 million gets defined,” he said. “My guess is they may have to adjust that down. That adjusts the risks downward.”
The possibility of a Mashpee casino opening in the region has clearly chilled interest from commercial developers.
Under a deal that Governor Deval Patrick signed with the tribe, a Mashpee casino would share no gambling revenue with the state if a commercial resort casino opens in the southeast region, giving a tribal facility a leg up on a commercial competitor. Commercial casinos will pay a state tax of 25 percent on gambling revenue.
“That’s a big competitive advantage when it comes to offering comps and amenities and the quality of the facility,” Barrow said.
Skeptics have said for years that the Mashpee may never overcome legal hurdles to federal approval of a casino.
The tribe, however, is growing more confident.
The primary legal issue facing the Mashpee is that tribal gambling can take place only on sovereign Indian land, and the Mashpee have no land that qualifies. The tribe has asked the US Department of Interior to take its proposed Taunton casino site into trust for the tribe, making the site eligible to host gambling. Taking land into trust used to be a routine – if lengthy — administrative process, which became much more complicated after a 2009 US Supreme Court case limited the federal government’s ability to create trust land.
The department came up with a procedure to work around the Supreme Court ruling, and in 2010 said it would take land into trust for a Pacific Northwest tribe known as the Cowlitz. The Mashpee are following a similar procedure.
Opponents of a planned Cowlitz casino sued, and the important test case is pending in federal court in Washington, D.C., said the Mashpee’s lawyer, Arlinda Locklear.
“What’s at stake is whether or not the court will uphold the standard that the department applies, not only to Mashpee, but to everybody in Indian country,” Locklear said.
If the initial court decision supports the government’s position, that would be good news for the Mashpee, she said. Locklear expects the department to move forward in the aftermath of a court victory to take land into trust for the Mashpee.
In the meantime, several groups have been linked to commercial casino plans in the southeast:
■ A development company, KG Urban, has sought to build in New Bedford since the gambling law was signed three years ago. A company spokesman said KG executives were cheered by the overwhelming New Bedford vote earlier this month against a proposed repeal of the state casino law.
■ George Carney, the owner of Raynham Park, a simulcast betting parlor and former dog racing track, confirmed this week that he is exploring a casino bid on another large parcel he owns in Brockton.
“I don’t have a signed deal with anyone, but I’m working on it,” Carney said in an interview.
■ David Nunes, a proponent of a Milford casino proposal that failed last year in a local referendum, confirmed last week that he intends to join the Southeastern Massachusetts license sweepstakes, though he had not finalized a partnership deal or a location.
■ The town of Somerset in June hired Considine & Furey, a Boston law firm, to reach out to casino companies to test interest in building a gambling resort there.
■ Foxwoods Resort Casino, which was part of the unsuccessful Milford effort last year, expressed interest in Fall River as far back as late 2013, though the Connecticut casino giant was unable to work out a deal with the city. No one from the company returned messages this week.
■ Elias Patoucheas, president of the Claremont Cos., said Claremont remains interested in attracting a casino to the land it controls in Bridgewater. Casino operators, however, have been reluctant to commit due to “the looming threat of the tribe” and “the required $500 million capital spend.”
